Asia, North America lead way in growth of NGL, LPG trade

Jan. 12, 1998
Recent analyses of world NGL trade indicate that important changes in LPG supply and demand are under way in Asia and North America. LPG markets in the 1990s reflect a rapidly shifting balance between East-of-Suez and West-of-Suez markets. This shift has increased concern about availability of future LPG supplies for Asia.
Ken Otto, Ron Gist, Craig Whitley
Purvin & Gertz Inc.

Rick Haun
Purvin & Gertz Inc.

Recent analyses of world NGL trade indicate that important changes in LPG supply and demand are under way in Asia and North America.

LPG markets in the 1990s reflect a rapidly shifting balance between East-of-Suez and West-of-Suez markets. This shift has increased concern about availability of future LPG supplies for Asia.

World developments

During 1996 and the first half of 1997, disruptions and delays of LPG supply sources combined with strong global demand and correspondingly low inventories, led to a run-up in LPG prices. Shortly thereafter, a broad collapse in prices occurred, demonstrating the volatility of the LPG market.

The next several years could continue to be fairly volatile for LPG pricing.

Annual global demand for LPG is approximately 179 million metric tons, up more than 60 million metric tons from 1985 consumption (Fig. 1 [43,045 bytes]). During the 1990s, world LPG demand has risen on average 3.8%/year, more than twice as fast as demand growth for petroleum in the same period.

LPG demand is expanding worldwide but most dramatically in Asia where LPG consumption has been rising on average by more than 6%/year. The Middle East also experienced strong demand growth, driven by the addition of several new LPG-based petrochemical projects.

In the future, worldwide demand for LPG will continue to expand by more than 4.5%/year through 2005, reaching approximately 235 million metric tons/year-an increase of 56 million metric tons.

East vs. West-of-Suez

World LPG demand can be separated into two markets, east and west of the Suez Canal.

The East-of-Suez market was a fairly small part of total world LPG consumption in 1985 (Fig. 2b [80,432 bytes]). LPG demand has grown particularly fast East-of-Suez, however, and now represents around one-third of total worldwide consumption. This trend will continue, putting even more upward pressure on East-of-Suez markets.

Residential and commercial demand accounts for about one-half of global LPG consumption, and the East-of-Suez region accounts for more than 36% of world demand in this end-use sector.

By 2005, the East-of-Suez region will represent around 45% of world LPG consumption in the residential/commercial market.

Although per-capita LPG consumption in the East-of-Suez region is much lower than in the west, the region has a large population and many developing markets. In time, therefore, the gap between regional consumption patterns will narrow as markets continue to expand faster in the east.

As for the chemical markets, roughly 40 million metric tons of LPG are consumed by the chemical industry. More than 85% occurs in the West-of-Suez markets.

This market will significantly expand through 2005, but most of the growth will continue to be in the West despite addition of several new LPG-based petrochemical projects in the Middle East.

Use of LPG as automobile fuel is almost evenly divided between the East and West. Moderate growth in this market will take place, but demand will remain far less than the ultimate potential for this sector. Future demand growth will depend greatly on government tax policies and environmental regulations.

As for world LPG, production continues to increase, but not as fast as base demand in markets such as resi dential/commercial and chemical. In the past 12 years, world LPG has grown by more than 60 million metric tons-an average compounded growth rate of 3.8%/year (Fig. 3 [50,311 bytes]).

LPG production increased in all regions of the world except the former Soviet Union (FSU). Production grew fastest in Asia and the Middle East.

In the next few years, global LPG will continue to expand, rising on average by more than 4.2%/year through 2000.

The growth rate will, of course, vary by region. Much of the growth in LPG in the late 1990s will occur West of the Suez Canal as several new production projects come on line in the Atlantic Basin (Fig. 2a).

East-of-Suez production will expand by about 4.7%/year between 1997 and 2000, but demand is growing even faster (by 6.5%/year). This situation suggests that volumes will get tighter in the East at least over the short-to- medium term.

LPG volumes exhibit some important differences between regions. In Asia, refineries are the primary sources of LPG. The opposite is true in North America because of its large natural-gas industry. Overall gas plants account for about 60% of the world LPG production.

The Middle East will remain the world's top LPG exporter, but exports are expanding faster in other regions of the world. Africa is becoming more of a world player, exports from the North Sea continue to rise, exports from Australia should increase, and Latin America is becoming a more important source of LPG.

Historically, East of Suez produced moderate amounts of surplus that had to be marketed in the West. With the rapid rise in LPG demand in the East, this surplus is declining and by the end of the decade the East could be in a slight deficit (Fig. 4 [81,002 bytes]).

Consistent with supply/

demand fundamentals, Middle East prices have risen noticeably relative to crude oil since the early 1990s. Prices should remain relatively firm over the next several years but not necessarily at the lofty levels experienced during 1996 and 1997.

A great deal of uncertainty persists, however, and many factors could drive prices higher, at least temporarily.


Asia includes many of the world's fastest growing economies. Growth will average nearly 5%/year for the next 5-10 years for the entire region. Several developing countries have much higher growth rates.

This economic activity is spurring a rapidly expanding need for energy in all end-use sectors: residential, transportation, industrial, and electric-power markets.

The rapid rise in the region's energy consumption is profoundly affecting many world markets in petroleum, natural gas, LPG, and chemicals. LPG residential demand is expanding rapidly in developing Asian countries (Fig. 5a [74,670 bytes]). Growth rates have been averaging 10-30%/year in several countries for the past 5 years.

The rapid surge in demand has tightened markets East-of-Suez and pushed prices higher. As a result, they have become more dynamic and pricing more volatile.

Asia represents more than one-quarter of total world LPG demand. It is the fastest growing market and is being deregulated and opened for new investments.

Moreover, personal incomes are rising, and more people are gaining access to LPG. Northern Asia (Far East) is the largest existing market for LPG in Asia, but other regions are expanding rapidly (Fig. 5b).

Japan accounts for 55% of total LPG demand in the Far East but is not growing very fast. China, on the other hand, is already the second largest market in the region and is growing rapidly. By 2005, Chinese and Korean LPG demand combined will surpass Japanese.

An historical review of Southeast Asia reveals strong demand growth in most countries, Singapore being the primary exception. Total LPG demand in Southeast Asia more than doubled since 1990 and should increase by 65-70% by 2005.

The Indian subcontinent, like China, has enormous growth potential for LPG demand. Demand should rise by almost 90% through 2005. Several factors can affect market demand, however, and demand could expand even faster under favorable conditions.

End uses in Asia

Chemical consumption of LPG is up from the early 1990s but is not growing rapidly because of the low availability and high price of LPG relative to other feedstocks such as naphtha.

LPG use in chemical markets is unlikely to rise quickly given the outlook for relatively tight supply/demand balances in the region. Chemical LPG demand will probably remain highly concentrated in Japan and Korea.

Use of LPG in town-gas applications appears to be declining as a result of high prices and expansions of LNG-based town-gas systems.

In terms of per-capita LPG consumption in Asian residential/commercial markets, Japan, Korea, and Taiwan lead with 45-55 kg/capita/year consumption. China has only 3-4 kg/capita/year, demonstrating the potential size of the markets in China, India, and other countries in the region.

Asian LPG consumption in the residential/commercial sector will rise by nearly 16 million metric tons over the next 8 years. Growth will be significant in many countries, but China and India will account for nearly 10 million metric tons.

Industrial demand for LPG in Asia is centered in the Far East, primarily Japan. The higher prices in the last several years hurt LPG's competitive position in the industrial market and only modest demand growth is likely in that sector. Most of this growth will occur in Southeast Asia, not Japan.

Fairly large LPG engine-fuel markets already exist in Japan and Korea. Continued growth is likely in Korea but the outlook for Japanese demand in this sector is flat. Growth may, in fact, occur in other emerging markets in the region.

Supplies to Asia

LPG production in Asia is actually expanding rapidly, by more than 6%/year since 1990. Demand, however, is outpacing it. The Far East is the largest source in the region, with most coming from refineries. In Southeast Asia, both refineries and gas plants are significant sources.

Total Asian LPG should expand another 9 million metric tons by 2005. LPG volumes will expand both from gas processing and from refining. Refinery production accounts for 69% of total LPG at present; this ratio will slip only slightly by 2005.

Imports will rise by 8 million metric tons to meet projected demand. Japan will remain the largest importer, but its requirement will grow only modestly. Korean LPG imports will resume their upward climb in 1998 after a brief period of flat imports.

Chinese LPG imports should continue to rise, reaching 7 million metric tons by 2005. Indian imports are also expected to increase significantly, approaching 5 million metric tons in 2005.

The vast majority of Asian LPG imports will continue to be from the Middle East. Some increase in net supplies from Southeast Asia is likely in the short term, but demand growth in the region will remain strong, limiting export availability over the long term.

Some increase in imports from Oceania is anticipated with new projects in Australia and Papau New Guinea.

North American NGL

Fig. 1 shows how North America is the largest NGL market in the world, primarily the result of extensive development of the region's natural-gas resource base.

Additionally, the refining industry is a relatively large producer of NGL, particularly propane. The NGL industry also benefits from an extensive distribution and storage system.


NGL production in Canada will continue to exhibit strong growth during the next 10 years ( Fig. 6 [68,301 bytes]). The vast majority of Canada's ethane, propane, and butane production results from natural-gas processing.

With increasing gas production, a corresponding increase in NGL production is inevitable. Petrochemical expansions in Canada, with the resulting rise in feedstock demand, will also lead to increased NGL recovery.

New NGL will come on line toward the end of the century from increased gas production and new processing plants in British Columbia. This production seems to be destined for collection in Alberta.

The proposed Alliance gas-export pipeline, however, will also be used to export NGL from British Columbia and northwest Alberta.

Canadian ethane

Initial ethane-recovery capability in Alberta began in the late 1970s with the beginning of the Alberta petrochemical industry. Most Canadian ethane is produced by these straddle plants at Empress and Cochrane, Alta.

Through the 1980s and 1990s, some of the larger field plants built ethane-recovery capability, and new straddle-plant capacity was also added.

Ethane production in Canada is fairly high by world standards at slightly more than 200,000 b/d. But production is limited by demand, and potential ethane production is considerably higher than existing.

To achieve full production, however, significant new investments would be required in the Canadian gas-processing industry and NGL infrastructure and put upward pressure on pricing.

Petrochemical consumption drives ethane demand in Canada. More than 60% of present ethane production is consumed at the two existing ethylene complexes: Dow in Fort Saskatchewan and Nova Chemicals in Joffre.

With expansion of the Dow facility before 2000 and a new Nova Chemicals/Union Carbide ethylene plant to be constructed at Joffre in 2000, domestic demand could well consume more than 80% of Canadian ethane.

Miscible-flood markets in Alberta currently account for approximately 20% of demand, but this volume will decline. Most of the large flood projects, including planned extensions, will likely be completed by the end of the 1990s.

Canadian ethane demand also includes petrochemical markets in eastern Canada and exports to the U.S. Contractual obligations to ship ethane on the Cochin pipeline will expire at the end of 1998 and should cause ethane exports via Cochin to decline to near zero.

Canadian propane, butane

More than 85% of all propane production in Canada is derived from western Canadian gas plants, with the balance recovered primarily in refineries, petrochemical plants, and heavy-oil upgraders.

Alberta dominates Canadian natural-gas processing with an overall increase in propane production at almost 5%/year to 2000, with more gradual increases thereafter.

Canadian refinery production of propane should experience a modest increase but remain less than 15% of total supply. In the latter part of the forecast, new production may originate from oil sands plants and frontier areas.

The major domestic propane-demand sectors are (in order of size) conventional markets, automobile fuels, solvent flood, and petrochemical feedstock. Conventional markets include residential and commercial consumption as a heating and cooking fuel, industrial demand, and agricultural demand for crop drying.

In the future, rising demand in conventional markets should be roughly balanced by declining use in miscible flood oil-recovery projects and an eroding auto propane market.

Three ethylene plants in eastern Canada consume some propane and/or butane as feedstocks. Consumption is seasonal and is generally higher in the summer than in the winter.

Expansion at the Nova Chemicals plant at Corunna last year included one additional furnace, but no other additions of ethylene capacity in eastern Canada are expected in the short term.

More than 70% of Canadian butane production originates in gas plants. The balance of the Canadian butane production is recovered from refineries, petrochemical plants, and heavy-oil upgrading facilities. New supplies may eventually come from oil-sands plants and frontier areas.

Even with the present outlook for increasing gas production, butane supplies in Canada should only grow slowly through 2000 before declining slightly.

Refinery demand for butane (normal butane as a gasoline blendstock and isobutane as an alkylation feedstock) dominates all demand sectors at more than 60% of total demand in Canada.

Because allowable gasoline vapor-pressure limits have been reduced during the summer months throughout most of Canada, less normal butane will be used for gasoline blending.

Base petrochemical consumption, which now uses approximately 25% of total demand, includes the use of normal butane in the manufacture of acetic acid in western Canada and the manufacture of methyl tertiary butyl ether (MTBE).

Overall, the butane market in Canada is facing more problems as natural-gas production continues to increase and solvent flood requirements for butane decrease.

Exports to the U.S. will not provide an outlet for butanes; surpluses must be either consumed internally in Canada for petrochemicals production or exported to alternative markets such as the Far East.

Construction of a new MTBE facility would improve the Canadian butane balance considerably.

Canadian natural gasoline

Alberta currently represents the largest source of C5+, accounting for more than 90%.

Some British Columbia production reported as crude oil has an API gravity comparable to condensate, and small amounts of C5+ and condensate are produced in Saskatchewan and Manitoba.

Within Alberta, some C5+ is blended with heavy crude oils to reduce the viscosity and improve the transportation characteristics of these crude oils. This market will see a significant shift as heavy-oil development demands more and more of this material as diluent until it overwhelms the market.

U.S. exports should gradually decline as the diluent market expands.


Mexico's relatively large oil and gas industry provides significant volumes of NGL for domestic sale and export from two sources-natural-gas processing plants and refineries.

Gas processing accounts for approximately 88% of total NGL and essentially all ethane and natural gasoline. Refinery production accounts for the remaining 12%.

Approximately 70% of the NGL produced in 1996 was from processing associated gas from crude fields bordering the Gulf Coast and offshore in the Bay of Campeche. The major processing plants include Nuevo Pemex, Cactus, La Cangrejera, and Morelos. Smaller gas-processing facilities are located at Reynosa, Poza Rico, and Pajaritos.

Total NGL from gas processing 1990-95 rose 3%/year.

Future NGL production rates will likely rise as Pemex begins to produce more natural gas to keep up with the rising industrial and power-generation demand.

Pemex operates six refinery complexes with a total processing capacity of 1.5 million b/d of crude oil. The refineries produced about 57,000 b/d of LPG in 1996 in excess of internal demand.

While gross refinery production of LPG is expected to increase, the amount available for external sale should decline as more LPG is consumed internally by the refineries as their alkylation plants begin to operate.

Mexican ethane, LPG

Ethane is produced from gas-processing plants and consumed almost exclusively as industrial fuel and as chemical feedstock for ethylene production.

Total recovered ethane exceeds the quantity used as petrochemical plant feedstock, and the excess is re-injected into the natural-gas distribution system. Ethane production will grow modestly at 1.9%/year between 1997 and 2005.

Ethane supply in Mexico could be much higher, however, if petrochemical feedstock demand grows faster than anticipated.

As a result of an extensive gas-processing system, Mexico ranks fourth in the world in LPG production with approximately 256,000 b/d in 1996. Production is concentrated in the southeastern region of the country where 95% of Mexico's LPG is produced by the Cactus, Nuevo Pemex, Morelos, and La Cangrejera processing plants.

To supply the major population regions, it is more economical to import LPG into the northern regions of Mexico and to export surplus production from the southeast.

An outlook for rising gas production in Mexico suggests a steady increase in LPG production by gas-processing plants at about 3.9%/year between 1997 and 2005. This outlook assumes a reasonably aggressive oil and gas exploration program. Pemex has plans for even higher oil and gas production rates, however, than those adopted by Purvin & Gertz.

Refinery-produced LPG will decline to around 43,000 b/d by 2000 as internal refinery demand increases. After this period, refinery LPG should gradually rise with increased refining activity.

Net imports of LPG are expected to increase overall demand in Mexico faster than production. Total LPG imports should increase steadily at about 3%/year through 2005. Inter-regional transfers of LPG should increase as the new LPG line from Jaltipan, Veracruz, to Salina Cruz is utilized.

A new LPG pipeline has been constructed from the Hobbs complex in West Texas, to El Paso, Tex., and on to Juarez, Mexico, where it terminates at Pemex's Mendez terminal (OGJ, Aug. 11, 1997, pp. 55 and 58).

LPG is sold in Mexico primarily as a propane/butane mix at a ratio of 60/40, although consumption in the North region of Mexico may be up to 100% propane at times, depending on imports from the U.S. and the distribution mixture.

Increased natural-gas use will tend to curb use of LPG in the residential sector, especially as gas-distribution systems are constructed in new housing and commercial developments. Nonetheless, growth in LPG use by the residential-commercial sector should average about 2.5%/year through 2005.

As a result of continued clean-air standards, LPG consumption in the auto-fuel sector will likely increase on average at 3.5%/year through 2005.

Mexican natural gasoline

In Mexico, natural gasoline is used as a gasoline blendstock by refineries or as a petrochemical feedstock. A small portion recovered from natural gas is blended into crude oil in the field.

Natural-gasoline will increase at approximately 3%/year. Refining demand, including gasoline blending, should grow at about 3.5%/year through 2005.

Chemical demand, mostly for production of aromatics, is the largest consuming sector of natural gasoline in Mexico. Approximately 41,000 b/d were consumed in 1996; demand will likely grow at 2%/year through 2005.

Other demand includes natural gasoline for crude spiking and use as a diluent for heavy crude, splash blending into gasoline, and miscellaneous. Exports will increase at 7.6%/year between 1996 and 2005.

United States

The NGL industry in the U.S. is the largest, most highly developed, and most complex in the world. NGL is produced from natural gas by gas-processing plants and from crude oil in refineries.

Fig. 7 [55,660 bytes] shows NGL-supply growth by product through 2005.

Gas processing accounts for about 73% of the total U.S. NGL production and essentially all ethane and natural-gasoline. Refineries are vital sources of propane (nearly 50% of total U.S. in 1996) and have become a significant part of total normal butane production (31% of total in 1996).

In addition, merchant butane-isomerization units are a significant source of isobutane.

NGL production from gas processing will grow at about 2.3%/year through 2000. The growth rate in total NGL production by gas plants should continue to rise after 2000 but at slightly lower rates.

Refineries in the U.S. are typically high-conversion facilities that produce significant quantities of NGL. Therefore, the U.S. refining industry is a large source of NGL (primarily propane) and also a significant purchaser of NGL for gasoline blending and alkylation feedstock.

Mandated changes in gasoline quality, including summertime volatility reduction and reformulation, will continue to affect refinery NGL supply/demand through 2000.

The fastest growing market for NGL in the U.S. will be for the production of ethylene. Other markets should also continue to grow, but at a slower rate (Fig. 8 [54,792 bytes]).

Ethane, propane

Ethane is produced predominantly from gas-processing plants and is consumed almost exclusively as feedstock for olefins plants. Ethane production from gas plants increased significantly in recent years as a result of attractive extraction economics.

Short-term fluctuations in ethane-extraction margins will continue as a result of volatility in natural gas and ethane pricing. Although there may be short periods when ethane recovery is unprofitable in the Permian basin, it is more likely that any needed supply corrections will occur primarily in outlying ethane-production regions (such as the Overthrust and Canada).

Ethane production in the U.S. will increase on average at about 2.7%/year between 1996 and 2000 as declining production in Texas will be more than offset by rising production in Louisiana.

Between 2000 and 2005, ethane should grow at a slightly higher pace as a result of rising production in Texas, Louisiana, and New Mexico in Petroleum Administration for Defense District (PADD) III, and PADD IV, Colorado, Wyoming, Utah, Idaho, and Montana.

Ethane imports from Canada via the Cochin pipeline will likely drop to near zero in 1999 because of changes in the commercial structure of pipeline operations.

In 2000, however, the proposed Alliance natural-gas pipeline or some competing project from Alberta may start up. Alliance is to be a high-pressure gas pipeline that will bring entrained liquids that will then be stripped after crossing into the U.S.

Ethane demand in the U.S. consists almost entirely of feedstock for ethylene plants, most of which are on the Texas and Louisiana Gulf Coasts. Adequate supplies of ethane and propane will be available to enable the construction of five or six new NGL-based ethylene plants between 2000 and 2005.

Additionally, one or two new flexible heavy-liquids crackers will also be built during this period.

Propane in the U.S. is supplied from gas plants, refineries, and imports. The country receives overland imports via pipeline, rail, and truck from Canada, and waterborne imports from Algeria, Mexico, Venezuela, the North Sea, and the Middle East.

Total propane production by gas plants in the U.S. will rise at about 1.7%/year between 1996 and 2000, then increase at a slightly lower rate after 2000. Refinery production of propane will increase on average at 1.6-1.8%/year between 1996 and 2000.

After 2000, this growth should slow somewhat after the refining industry implements the operational changes required by the U.S. Environmental Protection Agency's (EPA) Phase II gasoline-reformulation plan.

To meet expanding demand for propane, imports into the U.S. (mostly waterborne) will have to increase considerably, primarily as a feedstock for ethylene plants. The cost of these imports should not be prohibitive, however, as a result of rapidly rising propane production in the Atlantic Basin.

U.S. propane demand can be divided into fuel and petrochemical.

Propane consumption as a feedstock for ethylene production is the most dynamic, fastest growing market in the U.S. Between 2000 and 2005, as many as eight new ethylene plants will be built in PADD III, of which five or six will be NGL crackers. Thus, propane cracking rates should increase significantly during this period.

Consumption in the residential/commercial end-use sector will grow slowly at roughly 1.5%/year by 2000 and somewhat slower thereafter. Therefore, within the next 1-2 years, propane use by ethylene plants should surpass residential/commercial heating as the largest single use of propane.

Propane fuel use by industrial users (not including petrochemical feedstocks) should grow somewhat more slowly than the overall U.S. economy, with most of this new growth coming from cogeneration plants.

Engine-fuel use will grow rapidly in both PADDs I and V as new regulations are enacted as part of the the 1990 Clean Air Act Amendments but only reach about 4% of the total U.S. market by 2000. Thereafter, little growth is anticipated.

U.S. butanes

In the early 1990s, normal butane received a great deal of attention as a result of implementation in summer 1989 of EPA's Phase I summertime gasoline-volatility regulations, followed in 1992 by Phase II regulations.

Prices have not been as adversely affected as was originally expected because refiners simply store excess normal butane during the summer, then use it for gasoline blending during the winter.

Additionally, normal-butane demand increased (via isomerization) for production of both MTBE and propylene oxide, and ethylene plants significantly increased their use of normal butane.

A relatively small increase in normal-butane from refineries should occur in 1998 when EPA implements use of its "complex model" to calculate automobile emissions, but refinery production of normal butane should jump in 2000 when Phase II regulations for gasoline reformulation are initiated.

Although reduced gasoline vapor pressure is not specifically mandated, it will likely continue to be economically attractive.

PADD I (U.S. Eastern Seaboard, Florida to Maine) should experience the largest relative response to Phase II gasoline reformulation.

A noticeable but smaller response should occur in PADD II (U.S. Midwest, Oklahoma, and Tennessee north to North Dakota and Minnesota), mostly because of the use of reduced gasoline volatility as part of State Implementation Plans in several states in the region.

Only a small increase is likely in normal butane from refineries in PADDs III, IV, and V (U.S. West, Arizona to Washington including Alaska and Hawaii) in 2000.

Three market sectors-exports, butane isomerization, and petrochemicals (ethylene-cracker feedstock)-can absorb the net increase in normal-butane supplies caused by lower gasoline-volatility specifications. Reduced imports can also help rebalance domestic supply and demand.

Increased use of normal butane by ethylene plants is probably the single largest factor which will keep the market balanced.

Growth in production of acetic acid and maleic anhydride should be slow. Operating rates of isomerization units will slowly increase to satisfy rising isobutane demand for the production of propylene oxide, MTBE, and alkylate.

U.S. i-C4, C5

Natural-gas processing provides the largest amount of domestic isobutane supplies, accounting for about 50% of the total in 1996. Total U.S. gas-plant production of isobutane will likely grow on average at 1.7%/year through 2005.

Although most refineries are net consumers of isobutane, some produce slightly more than they consume internally. This production will rise very slowly, reaching nearly 13,000 b/d in 2005.

The refining industry consumes large amounts of isobutane, primarily for the production of alkylate. Refinery purchases will likely increase, on average by 1.8%/year through 2005.

This increase will primarily result from the use of alkylate as a key blending component for producing reformulated gasoline, particularly in California.

There are only two other major uses of isobutane in the U.S.-propylene oxide (PO) production and MTBE production.

PO consumption will experience average growth of 2.4%/year. Isobutane consumption by MTBE plants will likely increase through 1999 as the operating rates of these plants increase. No new butane-based MTBE plants will be built in the U.S.

Natural gasoline (C5+) is a mixture of light hydrocarbons with a gravity of 80° API or greater that is produced from natural-gas processing plants.

Because natural gasoline is only produced domestically by natural-gas processing plants, its production tracks the volume and composition of natural gas that is processed.

Thus, declining production of associated natural gas will have an adverse effect on natural-gasoline production. Nonetheless, natural-gasoline production will rise slowly at an average of almost 1%/year.

Demand for natural gasoline in the U.S. is limited to three major categories: refineries, chemicals, and other.

The refining category covers demand for gasoline for both gasoline blending and as a feedstock for C5/C6 isomerization. Chemical demand is mostly olefins-cracker consumption for ethylene manufacture.

Finally, "Other" demand includes spiking into crude oil and use as a diluent for heavy crude, splash blending into gasoline, and miscellaneous uses such as solvents.

Refinery demand for natural gasoline will decline through 2000 because of its relatively high vapor pressure, which makes it somewhat unattractive for the production of reformulated gasoline. After Phase II reformulated gasoline is introduced into the market in 2000, natural-gasoline use by refineries will remain relatively flat.

Natural-gasoline demand for ethylene production should remain strong, growing on average at about 1.9%/year.

The Authors

Ken W. Otto is a vice-president in the Houston office of Purvin & Gertz Inc. He joined E.I. DuPont de Nemours & Co. in 1977, then moved to Champlin Petroleum Co. in 1979 and served 4 years at Corpus Christi Petroleum Co. Otto joined Purvin & Gertz in 1986, was elected principal of the company in 1987 and senior principal in 1990. He holds a BS in chemical engineering (1977) from the University of Texas at Austin.
Ronald L. Gist is a principal in the Houston office of Purvin & Gertz Inc., joining the company at the beginning of 1996. He began his career with E.I. DuPont de Nemours & Co. in 1971 after receiving both BS and MS degrees in chemical engineering from Colorado School of Mines. Gist is a member of the Southwest Chemical Society and is Purvin & Gertz' representative to GPA's statistical committee.
S. Craig Whitley is a principal in Purvin & Gertz Inc.'s Houston office. He joined the company in 1993, working in market analysis of natural gas, LPG, and NGL markets. Whitley has a BS in chemistry and zoology from Northwestern Louisiana State University, Nachitoches. He is a member of GPA, International Association of Energy Economics, National Propane Gas Association, and Purvin & Gertz' representative on GPA's international committee.
Rick R. Haun is vice-president and director in Purvin & Gertz Inc.'s Dallas office. He began his industry career with Continental Oil Co. (now Conoco) in 1965 and joined Purvin & Gertz as a consultant in 1974. He was elected principal of the firm in 1976 and senior principal in 1978. After 4 years in the London office, he was appointed its manager in 1980. He returned to the Dallas office in 1982, was elected director, and in 1983 was named an officer. Haun holds a BS (1965) in chemical engineering from Montana State University. He is a registered professional engineer in Texas and a member of AIChE and NGPA.

Copyright 1997 Oil & Gas Journal. All Rights Reserved.